Handling Homes with Non-Mortgage Liens

Today’s REI Classroom Lesson

We have John Anderson in the classroom with us today to go over what to do if there are non-mortgage liens on a property you’re wanting to buy.

REI Classroom Summary

Whether it’s liens from the IRS, HOA, or mechanic liens, there are ways to negotiate a lower price in order for you to purchase the home.

Listen to this REI Classroom Lesson

Real Estate Investing Classroom Show Transcripts:

Mike: Welcome back to the FlipNerd.com REI Classroom, where experts from across the real estate investing industry teach you quick lessons to take your business to the next level. And now, let’s meet today’s expert host.
John: Hi, this is John Anderson. I am one of the founders of Oyezz Real Estate, a brokerage that specializes in short sales. I’m also HomeVestor franchise owner in Dallas and in the REI Classroom today, I’m going to be talking about what to do with properties that have liens other than your traditional mortgage.
Mike: This REI Classroom real estate lesson is sponsored by UglyOpportunities.com.
John: If you’ve got a property that’s got other liens on it, they’re going to have to be addressed. You can’t just pay off the mortgage and say, “Well, the rest of the liens go away.” That’s not the case. The liens will stay there. And most title companies are going to force you to pay off all the liens in closing anyway. So you may not want to pay the full amount on these liens and that’s what we’re going to talk about today.
These types of liens could be anything from IRS liens to HOA liens to mechanic liens. A mechanic lien meaning, let’s say, a homeowner put a new roof on or an air conditioning in the house and the air conditioning company or the roofing company financed it and they put a lien on the property, which is called a mechanic’s lien. You can get out of these liens at a lower amount than what is owed on them. We do it all the time and basically what you do is you go to these organizations, these companies, and you negotiate with them.
Now, I’ll be honest. The first time you go to them and say, “Hey, I want to talk to you about this lien,” their response is going to be, “I want a full payoff.” And this is where your negotiating skills come in and you can talk about, “Well, I’m willing to buy the house and you can get a payoff here right away. And I want to offer you X on the Y amount.” Again, a lot of the lien holders are going to say, “No, no, no, no. I want a full amount,” but what you need to do is find out who the true decision-maker is because in many cases, you’re going to be talking to a clerk, who’s taught just to say no. So if you’re talking to somebody like that, push him for, “Do you make the decisions? If not, can I talk to the person who makes the decision?” and negotiate the price down. It can be done. We do it all the time.
Things that are negotiable: IRS leads. You’d think, “That’s not negotiable at all.” They are. The IRS, if you position it as, “Look, this is a way for you to get some of the money that’s due to you. I can’t give you the full amount, but I can give you this amount if you release your lien.” In many cases, the IRS will take it. Now, they’re not going to lift their judgment or the amount of money that’s owed to that homeowner. They’ll still owe them the money, but you’re able to get the property with a less amount of the lien paid.
The HOAs are always negotiable, especially if it’s a situation where they’re probably not going to get paid. And you can paint that picture that they’re probably not going to get paid and you’ll probably end up dealing with the management company. And, again, when you’re caught in the management company, their response is going to be, “No, we want full payoff,” but the way to get around that is go to the board. The board is made up of members of the community. A lot of times, if you talk to the board, they’re going to be open to getting whatever money they can, and you can negotiate a short payoff on that.
Mechanic’s lien, same thing. We talked about that. There are many ways you can get these other liens settled for less than what is truly out there. Again, I’ll reiterate that in many cases, the lien holder is not going to forgive the amount that the homeowner owns, but if you can get the house with the lien paid less than what is on there, it’s a way to get the price of the house down. If you’ve got any questions, give me a call. I’m more than happy to talk to you about how it works and help you through it. My information is there and that covers what to do if you’ve got non-mortgage liens or liens other than a mortgage on a property.
Mike: HomeVestors, the “We buy ugly houses” folks, is a franchise system of hundreds of real estate investors that have purchased over 65,000 houses. If you’d like to learn more about the most powerful real estate investing system in existence, whether you’re a pro looking to take your business to the next level, or whether you have no experience at all, but a burning passion to be successful in real estate investing, please visit FlipNerd.com/ugly to learn more.
Please note the views and opinions expressed by the individuals in this program do not necessarily reflect those of FlipNerd.com or any of its partners, advertisers, or affiliates. Please consult professionals before making any investment or tax decisions, as real estate investing can be risky.
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